This is a really interesting article here. I'm considering implementing JS encryption for offering security when using local storage. It's absolutely clear that this will only offer protection if the device is stolen (and is implemented correctly). It won't offer protection against keyloggers etc. However this is not a JS issue as the keylogger threat is a problem of all applications, regardless of their execution platform (browser, native). As to the article "JavaScript Crypto Considered Harmful" referenced in the first answer, I have one criticism; it states "You could use SSL/TLS to solve this problem, but that's expensive and complicated". I think this is a very ambitious claim (and possibly rather biased). Yes, SSL has a cost, but if you look at the cost of developing native applications for multiple OS, rather than web-based due to this issue alone, the cost of SSL becomes insignificant.
My conclusion - There is a place for client-side encryption code, however as with all applications the developers must recognise it's limitations and implement if suitable for their needs, and ensuring there are ways of mitigating it's risks.